Vacancy rates for all space classes in downtown Vancouver have dropped substantially over the past 12 months. Demand is being driven by technology and media companies with the expectation that this surge in demand may see vacancy rates decline to record low levels.
According to a Real Estate Market Research report by Newmark Knight Frank Devencore, vacancy rates are trending towards historic lows in downtown Vancouver, dropping from 8.7 to 6.8 per cent since October 2017 . In the Class A market, the average gross rent is $49.52/sf.
“The downtown market will remain challenging for tenants pending the next development cycle, which will not hit its stride until 2021,” said Jon Bishop, executive vice president and managing principal of Newmark Knight Frank Devencore’s Vancouver office. “Landlords will be limiting tenant inducements and expanding tenancies will have to consider either leasing non-contiguous space or locating some or all of their operations to the suburbs.”
In Richmond, Burnaby and Surrey, Class A vacancy rates currently range from 10.4 to 17.9 per cent, and average gross rents are between $27.14/sf and $35.05/sf. Most suburban submarkets are tightening.
“Burnaby is taking the lead in positioning itself as an alternative urban centre to downtown Vancouver,” said Bishop. “Anticipating a population growth of over one million people by 2041, the city has created a comprehensive Metrotown Downtown Plan that aims to establish Metrotown as the focal point for growth and development. The plan promotes commerce and job growth, improves connectivity and transportation choices, and integrates office, retail, and residential development with urban plazas and other amenities in a concentrated and sustainable downtown core.”
With contemporary downtown office space in short supply, tenant negotiating leverage will be severely constrained until the next wave of developments is completed. As has been the case for some time, strata office developments will likely continue to attract tenants.